A simple way that you can become your own investment adviser using the trend following plan developed by Dick Fabian.
2 For The Money
Al Thomas presented the concept of "Two for the Money" to me. You can find it described on his web site MutualFundMagic.
The basic idea is that you would trade just two equities (mutual funds or exchange-traded funds). One fund when the market is trending up and another, opposite fund, when the market is trending down.
For example, when the market is in an uptrend you could hold a mutual fund such as the ProFunds Bull fund (BLPIX) which tracks the S&P 500. When the trend changes, and you get a sell signal, you would sell the Bull fund and switch to the Bear fund (BRPIX). Therefore you would be virtually fully invested at all times, taking advantage of growth during both up and down trending markets.
There are many mutual funds and ETF’s that can be used to trade in this fashion. If you go to the tools page, you can check out some of the offering from ProFunds, Rydex and ProShares to name a few.
I am not suggesting that you adopt this trading strategy. I only want to present it as another simple way that you can use trend following.
In theory, you could trade just one "pair" or have a diversified portfolio by trading a few "pairs".
Some funds and ETF’s are available for:
Dow 30
Nasdaq 100
S&P 500 Large Cap
S&P 400 Mid Cap
S&P 600 Small Cap
Russell 2000
US Dollar Index and other currencies
Gold and Precious Metals
Commodities
Developed Markets
Emerging Markets
…….and many more.
Again, you need to educate yourself about these types of investments if you choose to use them. Check out the tools page.
A word of caution about some of the ETF’s that can be used for this type of trading. Be careful when it comes to trading volume. Some of these ETF’s are thinly traded (low volume) and you can get a big spread between the bid and ask price. When you enter your order, it could be filled at a price several points different than you thought.
Do your homework.